THE region's universities must consider merging if they are to offer serious competition to the South-East's "golden triangle" in grabbing lucrative research work, MPs were told yesterday.

Officials from the Department for Business, Innovation and Skills said if universities could not bring themselves to merge individual departments could join up with similar courses elsewhere in the country to create "virtual departments".

The suggestions came as the government clashed with North-East MPs over allegations that an Oxbridge "academic clique" directs most research funding to the Oxford-Cambridge-London triangle.

The inquiry heard that the region's five universities receive just 3.6 per cent of the pot - while four institutions in the "golden triangle" are lavished with a staggering 36.6 per cent.

Dari Taylor, the Labour MP for Stockton South, said: "Where is the money for the North-East because we are not getting a fair slice of this funding?

"A minister who gave evidence to us on this said an academic clique was the problem. So what analysis have you made, because we want answers?"

But, in reply, Graeme Reid, the deputy director for economic impact at the Department for Business, insisted the allegation was unfair, describing the system for allocating research funding as "very clear, transparent and meritocratic".

The North-East was fourth out of the 12 UK regions for funding per university, sixth for funding per person and fourth if funding was compared to wealth.

Mr Reid - who is Scottish - said: "I see no evidence of regional bias at work. I see evidence of a system that operates with a high degree of transparency and rigour."

Suggesting it was unrealistic to compare the North-East with "extraordinarily high-performing" Oxford and Cambridge, he added: "They are not the enemy. They are huge assets to this nation."

The civil servant said two universities in Manchester had merged to create a single institution to "feature on a world map", while physics departments in Scotland and the South-East had created a "virtual department".

And he added: "They share capital-intensive equipment in order to compete at the highest level, because it is difficult for any university to afford all the equipment it needs.

"It is not for me to say that universities in the North-East should follow that model, but I would not be surprised if they were following it closely."

The clash, at a meeting of the North-East Select Committee, followed evidence sessions in the region, when academics and business leaders complained of the funding bias.

In particular, the chairman of the New and Renewable Energy Centre (NaREC), in Northumberland, warned that decisions were made by an Oxbridge-dominated clique.

The meeting was cancelled a fortnight ago, because the quorum of three MPs could not be reached. Yesterday, Phil Wilson (Sedgefield), David Anderson (Blaydon) and Denis Murphy (Wansbeck) also attended.